SCHEUNEMAN v. GENERAL MOTORS CORPORATION

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This case is again before us on remand from our
Supreme Court. The Supreme Court reversed our prior decision,[1]in which we concluded that the
doctrine of res judicata precluded defendant from applying the
coordination of benefits provision of § 354 of the
workers disability compensation act (WDCA), MCL 418.354;
MSA 17.237(354). Scheuneman v General Motors Corp, 461
Mich 906; 603 NW2d 784 (1999).On remand, we are asked to
consider whether § 354 is preempted by the Employee
Retirement Income Security Act (ERISA), 29 USC 1144(a). We
conclude that § 354 is not preempted by the ERISA and
affirm the decision of the Workers Compensation Appellate
Commission holding that defendant properly coordinated
plaintiff’s benefits.

Section 354 of the WDCA provides for the
coordination of workers compensation benefits with pension
or retirement benefits by requiring that the workers
compensation benefits be reduced by the amounts specified in
§ 354. In the instant case, plaintiff claims that his
workers compensation benefits were improperly coordinated
with an employer-funded mutual pension, i.e., a pension agreed to
by the parties when the employee is not eligible for a regular
retirement pension and is deemed ineligible for a disability
pension, pursuant to § 354(d), which provides that
workers compensation payments be reduced by:

The after-tax amount of the pension or
retirement payments received or being received pursuant
to a plan or program established or maintained by the
same employer from whom benefits under section 351, 361,
or 835 [of the WDCA] are received, if the employee did
not contribute directly to the pension or retirement plan
or program. [MCL 418.354(d); MSA 17.237(354).]

Plaintiff claims that the coordination of his
benefits under § 354(d) was improper because § 354 is
preempted by the ERISA. Section 1144(a) of the ERISA, 29 USC
1144(a), provides that the ERISA "shall supersede any and
all State laws insofar as they may now or hereafter relate to any
employee benefit plan described in section 1003(a) of this title
and not exempt under section 1003(b) of this title." American
Medical Security, Inc v Allstate Ins Co, 235 Mich App 301,
305; 597 NW2d 244 (1999).

To determine whether § 354 is preempted
by the ERISA, the first inquiry is whether the mutual pension
plaintiff receives is part of an "employee benefit
plan" as that phrase is defined in 19 USC 1003(a).
Generally, an employee benefit plan is covered by the ERISA if it
is established or maintained by "any employer engaged in
commerce or in any industry or activity affecting commerce,"
or by "any employee organization or organizations
representing employees engaged in commerce or in any industry or
activity affecting commerce." 29 USC 1003(a). The next
inquiry is whether any of the exceptions in § 1003(b) apply
to take the mutual pension outside of the ERISAs coverage.
The ERISA does not apply to an employee benefit plan if 1) the
plan is a governmental plan,[2]2) the plan is a church plan[3]with respect to which no election has been made under
section 410(d) of Title 26, 3) the plan is maintained solely for
the purpose of complying with applicable workers
compensation laws or unemployment compensation or disability
insurance laws, 4) the plan is maintained outside of the United
States primarily for the benefit of persons substantially all of
whom are nonresident aliens, or 5) the plan is an excess benefit
plan[4]and is unfunded.

Plaintiff provided this Court with few details
regarding the nature of the mutual pension at issue. Plaintiff
merely states that "[t]here can be no doubt that the mutual
pension benefit paid to plaintiff is an employee benefit
plan" under the ERISA. Because it appears from the
facts presented that the mutual pension at issue was part of an
employee benefit plan as that phrase is defined in the ERISA, and
that none of the exceptions set forth in § 1003(b) are
applicable, for the purposes of this opinion we will assume,
without deciding, that the mutual pension at issue was part of a
pension plan covered by the ERISA.

Assuming that the mutual pension plaintiff
receives is part of an employee benefit plan that is covered by
the ERISA, we must now determine whether § 354
"relates to" the employee benefit plan. A state law
"relates to" an employee benefit plan if it
"has a connection with or reference to such a
plan." DAvanzo v Wise & Marsac, P.C., 223
Mich App 314, 321; 565 NW2d 915 (1997), quoting Ingersoll-Rand
Co v McClendon, 498 US 133, 139; 111 S Ct 478; 112 L Ed 2d
474 (1990). A state law may "relate to" a benefit plan
even if its effect on the plan is indirect and even if the law
was not specifically designed to affect the plan. Ingersoll-Rand,
supra; DAvanzo, supra. Generally, the ERISA preempts a
state law when the state law interferes with an ERISA plan by 1)
altering the level of benefits that would be paid out under a
given plan from state to state, 2) altering the terms of a plan,
such as the requirements for eligibility, or 3) subjecting the
fiduciaries of a plan to claims other than those provided for in
the ERISA itself. Teper v Park West Galleries, Inc, 431
Mich 202, 214; 427 NW2d 535 (1988). However, while the scope of
the ERISA preemption provision is broad, it is not without
limits. "State laws or state-law claims whose effect on
employee benefit plans is merely tenuous, remote, or peripheral
are not preempted." DAvanzo, supra at 321-322,
citing Shaw v Delta Airlines, Inc, 463 US 85, 100, n 21;
103 S Ct 2890; 77 L Ed 2d 490 (1983). Moreover, it is presumed
that, in enacting the ERISA, Congress did not intend to preempt
areas of traditional state regulation. Teper, supra at
208. Workers compensation traditionally is an area of state
authority. Saylor v Parker Seal Co, 975 F2d 252, 256 (CA
6, 1992).

Applying these principles to the instant case
leads us to the conclusion that § 354 is not preempted by
the ERISA. First, § 354 does not alter the level of
benefits that would be paid out under a given employee benefit
plan from state to state. Teper, supra at 214. The
coordination provisions in § 354 have no effect on the
amount of benefits paid under the mutual pension. Rather,
§ 354 affects the amount of workers compensation
benefits paid to the employee. Second, plaintiff has not
demonstrated that § 354 alters the terms of the pension
plan. Id. Finally, plaintiff has not demonstrated that
§ 354 subjects the fiduciaries of the pension plan to
claims other than those provided in the ERISA. Id.

Because § 354 does not affect the
administration of the mutual pension plan, but only affects the
amount of workers compensation benefits paid, which is
traditionally an area of state authority, we conclude that any
effect of § 354 on the pension plan is too tenuous and
remote to warrant preemption.

Our conclusion is supported by the decision of
the Sixth Circuit Court of Appeals in Saylor, supra.[5]
In Saylor, the court considered whether the ERISA
preempted Kentucky common law allowing employers to reduce the
amount of workers compensation payments an employee
received by the amount of the payments the employee received
under a disability pension plan covered by the ERISA. Id.
at 254. Noting that the ERISA plan did not prohibit the
integration of pension and workers compensation benefits
and that the reduction in workers compensation benefits did
not affect the administration of the defendant’s pension plan,
the court concluded that the ERISA did not preempt the Kentucky
common law allowing the reduction in workers compensation
benefits. Id. at 256. Similarly, in the instant case,
because § 354 alters only the amount of workers
compensation benefits paid to an employee and has no effect on
the amount of pension benefits paid, § 354 is not preempted
by the ERISA.

Furthermore, contrary to plaintiff’s argument,
we find the United States Supreme Courts reasoning in Alessi
v Raybestos-Manhattan, Inc, 451 US 504; 101 S Ct 1895; 58 L
Ed 2d 402 (1981) to be inapplicable to the instant case. In Alessi,
the Supreme Court considered a New Jersey statute that prohibited
employee pension plans subject to ERISA regulation from reducing
an employees pension benefits by an amount equal to the
workers compensation payments for which the employee was
eligible. Alessi, supra, 451 US at 507-508. The Court held
that the state statute was preempted by the ERISA because it
prohibited pension plan administrators from integrating pension
benefits, which was a method of calculating pension benefits
permitted by federal law. Id. at 524. Unlike the state
statute at issue in Alessi, § 354 does not attempt
to regulate the administration of the pension plan, but only
regulates the amount of workers compensation benefits paid
to an employee. Thus, it is clear that Alessi is factually
distinguishable from the instant case.

We therefore conclude that the ERISA does not
preempt § 354 of the WDCA and we affirm the decision of the
Workers Compensation Appellate Commission holding that
defendant properly coordinated plaintiff’s benefits.